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How the presidential candidates plan to tackle tax policy

Alison Burke

The 2016 presidential race is heating up: Donald Trump is sweeping up delegate across the U.S. amidst talk of a brokered GOP convention, and Hillary Clinton and Bernie Sanders are still clamoring for what was once considered a shoo-in Democratic nomination for Clinton.

But between stump speeches and lively debates, the candidates have been mulling over an issue more likely to affect the daily lives of Americans than the topics typically captured in soundbites: Tax policy. From sweeping reforms to incremental policies, the tax plans outlined by the candidates served as the centerpiece for discussion at an Urban-Brookings Tax Policy Center event in 2016.

Are these plans thoughtful proposals that will lead to necessary reform, or are they political pipe dreams drenched in campaign rhetoric? Watch the event and read the summaries of the plans from the Tax Policy Center below to decide for yourself.

Donald Trump’s plan: Cuts federal revenues by $9.5 trillion, could increase national debt by 80%

Business executive and billionaire Donald Trump’s tax plan would significantly reduce marginal tax rates on individuals and businesses, increase standard deduction amounts to nearly four times current levels, and curtail many tax expenditures. His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households. The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save, and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts. Read the full paper by Leonard E. Burman, Jim Nunns, Jeff Rohaly, and Joseph Rosenberg here.

Hillary Clinton’s plan: Taxes the 1% to raise $1.1 trillion

Former Secretary of State Hillary Clinton proposes raising taxes on high-income taxpayers, modifying taxation of multinational corporations, repealing fossil fuel tax incentives, and increasing estate and gift taxes. Her plan would increase revenue by $1.1 trillion over the next decade. Nearly all of the tax increases would fall on the top 1 percent; the bottom 95 percent of taxpayers would see little or no change in their taxes. Under her plan, marginal tax rates would increase, reducing incentives to work, save, and invest, and the tax code would become more complex. In addition to these proposals, Clinton plans to release a forthcoming proposal to cut taxes for low- and middle-income families. Read the full analysis from Richard C. Auxier, Leonard E. Burman, Jim Nunns, Jeff Rohaly here.

Ted Cruz’s plan: Repeals income, payroll, Social Security, Medicare, and estate taxes, implements a new 16% broad-based consumption tax

Texas Senator Ted Cruz’s tax proposal would (1) repeal the corporate income tax, payroll taxes for Social Security and Medicare, and estate and gift taxes; (2) collapse the seven individual income tax rates to a single 10 percent rate, increase the standard deduction, and eliminate most other deductions and credits; and (3) introduce a new 16 percent broad-based consumption tax. The plan would cut taxes at most income levels, although the highest-income households would benefit the most and the poor the least. Federal tax revenues would decline by $8.6 trillion (3.6 percent of gross domestic product) over a decade. Read more from Daniel Berger, Leonard E. Burman, Jim Nunns, Joseph Rosenberg here.

Bernie Sanders’ plan: Raises $15.3 trillion to fund social services and fix our infrastructure

Vermont Senator Bernie Sanders proposes significant increases in federal income, payroll, business, and estate taxes, and new excise taxes on financial transactions and carbon. Under the Sanders plan, new revenues would pay for universal health care, education, family leave, rebuilding the nation’s infrastructure, and more. TPC estimates the tax proposals would raise $15.3 trillion over the next decade. All income groups would pay some additional tax, but most would come from high-income households, particularly those with the very highest income. His proposals would raise taxes on work, saving, and investment, in some cases to rates well beyond recent historical experience in the US. Read the full report from Leonard E. Burman, Jim Nunns, Jeff Rohaly, Joseph Rosenberg, Frank Sammartino here.

Marco Rubio’s plan: Converts the federal income tax into a consumption tax, moves the U.S. to a territorial tax system

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Prior to suspending his presidential campaign, Florida Senator Marco Rubio  proposed some major changes to the U.S. tax system. Under his plan, federal income tax would have been converted into a consumption tax by not taxing investment income of individuals and by converting the corporate income tax into a cash-flow consumption tax. It would replace most deductions and exemptions with a universal credit; eliminate estate taxes, the AMT, and all ACA taxes; and move the U.S. to a territorial tax system. A new $2,500 child credit would aid families with children. Taxes would fall at all income levels, with high-income households benefiting the most. Revenues would decline by $6.8 trillion over a decade (assuming no change in economic growth).Read Elaine Maag, Jim Nunns, Jeff Rohaly, and Roberton Williams’ full analysis here.

Jeb Bush’s plan: Incentivizes working, saving, and investing, could increase national debt by 50%

Before dropping out of the race, former Florida Governor Jeb Bush shared a plan to reduce individual and business marginal tax rates, curtail tax expenditures, and convert the corporate income tax into a cash-flow consumption tax. The proposal would cut taxes at all income levels, reducing federal revenues by $6.8 trillion over its first decade before considering macro feedbacks. The plan would improve incentives to work, save, and invest, but unless accompanied by very large spending cuts, it could increase the national debt by as much as 50 percent of GDP by 2036, which would tend to put a drag on the economy. Read the full analysis by Leonard E. Burman, William G. Gale, John Iselin, Jim Nunns, Jeff Rohaly, Joseph Rosenberg, and Roberton Williams here.

Read more about what Brookings experts are saying about the issues shaping the 2016 election here

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